Rick Perry Attacks Ethanol Subsidies in Iowa (ContributorNetwork)

In a speech in Pella, Iowa, Texas Gov. Rick Perry, a candidate for president, called for the abolition of ethanol subsidies. This is considered a bold position to take in the first caucus in the nation state, where a lot of corn is grown to make ethanol.

How does the U.S. subsidize ethanol?

The ethanol subsidy law was signed by President George W. Bush in 2004 and went into effect in 2005. The subsidy allows ethanol blenders to receive a 45 cents tax credit for every gallon of ethanol they blend with gasoline. The subsidy cost taxpayers $5.7 billion in fiscal year 2011. The U.S. also props up corn-based ethanol by imposing a tariff on sugar based ethanol from Brazil. Some economists believe restrictions on the domestic exploration and production of oil constitutes another indirect subsidy for corn based ethanol.

Why is the ethanol subsidy supported?

Supporters claim the subsidy reduces the country's dependence on foreign oil and encourages the domestic production of bio-fuel.

What do opponents of the subsidy have to say?

Opponents claim ethanol burns less efficiently than gasoline, thus driving up fuel consumption. Also using corn as fuel drives up the price of that commodity, which is also used as food and as feed for a variety of livestock.

Why is this important in Iowa?

According to the Iowa Corn website, Iowa is the No. 1 state for the production of corn. In 2007, 2.5 billion bushels were harvested. The fact the ethanol subsidy drives up the price of corn is seen as a feature instead of a bug for Iowa corn farmers and businesses that depend on them. Indeed much of the corn that Iowa now produces goes to create ethanol rather than for food.

Why is Perry attacking the ethanol subsidy in a state which is dependent on it?

Perry's assault is consistent with his energy policy, which calls for the termination of all subsidies for energy, both alternative and fossil fuels. He is doubtless gambling he will get points for standing up to a special interest. The problem is that while corn-based ethanol subsidies create an indirect tax on food prices, the benefits of the subsidy for Iowa corn interests is more public. Perry is also open to attacks for defending oil at the expense of ethanol, even though he is in favor of ending oil and gas subsidies.

Texas resident Mark Whittington writes about state issues for the Yahoo! Contributor Network.

Source: http://us.rd.yahoo.com/dailynews/rss/environment/*http%3A//news.yahoo.com/s/ac/20111102/us_ac/10346535_rick_perry_attacks_ethanol_subsidies_in_iowa

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